Discrete-time approximation of multidimensional BSDEs with oblique reflections

DOI10.1214/11-AAP771zbMATH Open1243.93128arXiv1210.1407MaRDI QIDQ433900FDOQ433900

Romuald Elie, Idris Kharroubi, Jean-Francois Chassagneux

Publication date: 8 July 2012

Published in: The Annals of Applied Probability (Search for Journal in Brave)

Abstract: In this paper, we study the discrete-time approximation of multidimensional reflected BSDEs of the type of those presented by Hu and Tang [Probab. Theory Related Fields 147 (2010) 89-121] and generalized by Hamad`ene and Zhang [Stochastic Process. Appl. 120 (2010) 403-426]. In comparison to the penalizing approach followed by Hamad`{e}ne and Jeanblanc [Math. Oper. Res. 32 (2007) 182-192] or Elie and Kharroubi [Statist. Probab. Lett. 80 (2010) 1388-1396], we study a more natural scheme based on oblique projections. We provide a control on the error of the algorithm by introducing and studying the notion of multidimensional discretely reflected BSDE. In the particular case where the driver does not depend on the variable $Z$, the error on the grid points is of order $1/2-varepsilon$, $varepsilon>0$.

Full work available at URL: https://arxiv.org/abs/1210.1407

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zbMATH Keywords

discrete time approximationbacjkward stochastic differential equations (BSDEs) with oblique reflectionsswitching problems

Mathematics Subject Classification ID

Probabilistic methods, stochastic differential equations (65C99) Applications of stochastic analysis (to PDEs, etc.) (60H30) Discrete-time control/observation systems (93C55) Optimal stochastic control (93E20)

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Cited In (20)

• A full balance sheet two-mode optimal switching problem
• Title not available (Why is that?)
• Infinite horizon multi-dimensional BSDE with oblique reflection and switching problem
• Swing Options Valuation: A BSDE with Constrained Jumps Approach
• Rate of convergence for the discrete-time approximation of reflected BSDEs arising in switching problems
• Time discretization and quantization methods for optimal multiple switching problem
• On the equality of solutions of max-min and min-max systems of variational inequalities with interconnected bilateral obstacles
• A Neural Network Approach to High-Dimensional Optimal Switching Problems with Jumps in Energy Markets
• Reflected BSDEs in non-convex domains
• Systems of integro-PDEs with interconnected obstacles and multi-modes switching problem driven by Lévy process
• \(L^p\)-solutions of multi-dimensional oblique reflected BSDEs and optimal switching problem on finite or infinite time horizon
• Multi-dimensional BSDEs with mean reflection
• Numerical methods for backward stochastic differential equations: a survey
• Viscosity solutions of systems of PDEs with interconnected obstacles and switching problem
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• Discrete Approximations of Strong Solutions of Reflecting SDEs with Discontinuous Coefficients
• A discrete-time approximation for doubly reflected BSDEs
• BSDE representations for optimal switching problems with controlled volatility
• Infinite horizon impulse control problem with jumps and continuous switching costs
• Irreversible investments with delayed reaction: an application to generation re-dispatch in power system operation

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